While most now expect liquefaction and export of natural gas from North America to happen, how much will be sent abroad and what it will mean for global markets and gas-oil price indexation are unclear.

Liquefied natural gas (LNG) exports from the United States will be too little to bend global gas markets away from oil price indexation, and a shale gas revolution abroad is too far off to decouple natural gas and oil prices in other parts of the world, Bernstein Research Senior Analyst Neil Beveridge said in a recent note. However, markets in Asia are getting restless with high prices, and in the United States there is wide disagreement among pundits about how much LNG eventually will be exported.

"In our view there is little to no chance of any change in the current pricing structure for international pipeline gas or LNG [liquefied natural gas]," Beveridge said. "To the relief of the LNG industry and investors in LNG producers, oil-linked pricing is here to stay. There is no such thing as a global gas market -- and we think there is unlikely there will ever be in the next 20 years." The bounty of natural gas being thrown off by shale plays in the United States will have "a far greater impact" on the domestic gas market than global markets, Beveridge said.

U.S. gas demand is about 67 Bcf/d, and shales produce about 25 Bcf/d, or about 35% of total North American supply. Assuming half of the 90 million metric tons per year of LNG export capacity proposed for the Lower 48 states is built, export capacity would be 40-50 million metric tons per year, or about 6 Bcf/d by 2020.

Last month, Japan's Ministry of Economy, Trade and Industry (METI) and the Asia Pacific Energy Research Centre held the Liquefied Natural Gas Producer-Consumer Conference in Tokyo. It was the first global conference in the field where people from the public and private sectors assembled from both the producer and consumer sides, according to METI. "For Japan, it is important not only to ensure a stable supply of LNG but also to procure it at low cost," said Japan Minster of Economy, Trade and Industry Yukio Edano, according to a summary of the meeting published by METI on its website. "It is a challenge to consider a new pricing system to replace the current system of linking the gas price to the crude oil price (gas-oil price link), which has lost its rationality, with one that will be beneficial for both producers and consumers."

The 10 Bcf/d in 10 years projection is higher than Beveridge's and Medlock's estimates, as well as a projection from Bentek Energy LLC, which recently said exports from the United States could reach as high as 5.4 Bcf/d by 2020, and another 1.4 Bcf/d could be exported from Canada. LCI-EVA said the two key uncertainties in their outlook are the question of whether/when the U.S. Department of Energy (DOE) will issue more permits for export to non-free trade agreement (FTA) countries (see NGI, Oct. 1); and how global competition for LNG market share in the Pacific Basin evolves.